Natural Gas Price Fundamental Daily Forecast – Get Ready for Volatility Due to Upcoming Futures Expiration
Natural gas futures are trading higher early Tuesday, but well off its intraday high as traders continued to react to weekend reports that put much cold temperatures in the forecast. The market is also being supported by a jump in liquefied natural gas (LNG) demand as well as contract expiration-driven volatility. A rise in spot gas prices also generated some upside momentum.
At 08:33 GMT, December natural gas futures are trading $6.079, up $0.023 or +0.38%.
LNG Demand Jumps
Natural Gas Intelligence (NGI) reported on Monday that Liquefied Natural Gas (LNG) demand rose nearly 1 Bcf day/day and was above 11 Bcf yesterday amid higher intake at the Sabine Pass and Freeport terminals.
Kevin Dobbs from Natural Gas Intelligence (NGI) noted on Friday, “With supplies depleted in Europe and parts of Asia, demand for U.S. exports of liquefied natural gas (LNG) held above 10 Bcf/d during the week and were expected to mount in coming weeks, providing some price support.”
Early Look at This Week’s Government Storage Report
NGI is reporting that Thursday’s government storage report may reveal another larger-than-normal increase. The natural gas analysts modeled a 94 Bcf build in stocks for the week-ending October 22. This would be well-above last year’s 32 Bcf injection and the 62 Bcf five-year average build, as recorded by the Energy Information Administration (EIA).
Last week, the EIA reported that domestic supplies of natural gas rose by 92 billion cubic feet (Bcf) for the week-ended October 15. That was slightly larger than the average increase of 88 Bcf forecast by analysts polled by S&P Global Platts.
Total stocks now stand at 3.461 trillion cubic feet (Tcf), down 458 Bcf from a year ago and 151 Bcf below the five-year average, the government said.
Short-Term Weather Forecast
According to NatGasWeather for October 26 to November 2, “Rain and snow continues over the West, while a second system tracks across the East, both with mild highs of 40s to 60s. Texas will be hot today with highs of upper 80s to low 90s, while pleasant highs of 70s-80s will stretch from the Plains to the Southeast.
The wet system over the West will track into the Plains & Texas Wednesday-Thursday with heavy showers and highs of 40s-70s, finally reaching the Northeast late in the week.
Overall, national demand will be moderate today, light mid-week through the weekend due to little coverage of lows below freezing or highs into the 90s, then increasing early next week as a cold shot arrives over the Midwest.”
Natural gas is being supported by weekend weather reports that moved the demand pattern from bearish to closer to seasonal/neutral for November 1-5. It was not particularly bullish.
The sharp rise in prices was fueled by the outlook calling for strong LNG demand from Europe, but most of all by the upcoming futures and options expiration. We saw a huge rally on September 27-28 due to the futures contract expiration. That more helped drive prices to $6.425. We could see a similar move this month so brace yourself.
Technically, the main trend turned up on the daily chart on Monday when buyers took out $6.111. The market is also trading on the strong side of a pair of retracement levels at $6.011 and $5.832.
A trade through $6.011 will be the first sign of weakness. A move through $5.832 could shift momentum back to the downside.